External Business Environment Analysis of IHG Hotels in the UK

This report examines the external business environment impacting InterContinental Hotels Group (IHG) PLC in the UK hospitality industry. It analyzes the influence of local government regulations, including consumer protection, employment, and competition laws, on IHG's operations and revenue generation. The report also assesses the impact of the European Union (EU) policies, such as the Economic and Monetary Union (EMU) and anti-discrimination policies, on the hotel group's business practices, including pricing and operational flexibility. Furthermore, it explores the role and political influence of pressure groups within the hospitality sector, examining their impact on legal and ethical business practices. The report also provides a comparison of the legal frameworks in England and Scotland, highlighting key differences relevant to the hotel industry. Finally, it outlines the UK and EU legislative processes affecting IHG's business, including licensing, food hygiene, employment laws, and single-currency regulations. The report concludes with an overview of different types of businesses in the hospitality sector, such as hotels, restaurants, and pubs, and their characteristics within the UK economy.

External Business Environment

Table of Contents
INTRODUCTION ..........................................................................................................................3
LO 1: PPT.......................................................................................................................................3
LO 2: ..............................................................................................................................................3
Task 2.1: The structure, operations and influence of local government on IHG hotels..............3
Task 2.2: Role and influence of the EU, and its impact on business and services industries .....4
Task 2.3: Role of pressure groups and their political influence in relation to national and local
issues with regard to hospitality industry.....................................................................................4
Task 2.4: Legal framework within the UK, identifying the main differences between the
English and Scottish systems.......................................................................................................5
Task 2.5: UK and EU legislative process as it affects a major UK hotel group’s business and
services at both local and national level .....................................................................................6
LO 3:................................................................................................................................................7
Task 3.1: Different types and characteristics of business that operate within the business and
services with a focus on the hospitality sector. ...........................................................................7
Task 3.2: Legal processes necessary for formation and dissolution of a registered company....8
Task 3.3: Structure and processes which determine the responsibilities and control within a
registered company......................................................................................................................9
Conclusion ....................................................................................................................................10
REFERENCES .............................................................................................................................11

INTRODUCTION
Hospitality industry has its major contribution to the UK economy. Operations of firms
falling in this sector are affected by both internal and external environmental forces. Here, this
report is going to deal with the external environment factors that are uncontrollable and directly
influence the organization (Gupta, 2013). This unit will analyse the external environment of UK
hospitality industry therefore; a leading hotel group named as “InterContinental Hotels Group
(IHG) PLC” has been taken into consideration. The influence of local government and legal
framework of UK on IHG hotels will be studied here in this report. The manuscript is further
going to assess the role and influence of the European Union (EU) and its impact on service
industry. In addition to this, different types and characteristics of hotel business are explained.
LO 1: PPT
LO 2:
Task 2.1: The structure, operations and influence of local government on IHG hotels
InterContinental Hotels Group PLC operates within UK thus; it conducts business in free
market economy. However, this hotel group has experienced number of restrictions from local
governments (Mellahi and Frynas, 2015). The arrival of visitors and tourists is influenced by the
political stability that further affects the revenue generation of IHG hotels. For an example; it can
be said that the political situation of Northern Ireland is unstable, which is the major reason for
that tourists reluctant to visit different places. As a direct consequence, the revenue generation of
hotels operating in such areas is low. To a wider era, local government of UK has developed
various laws including consumer protection act, employment law, competition law, etc which
affects the operations of hotels. Due to existence of competition laws, hotels cannot set
aggressive prices or possess monopoly structure in the market.
Application of competition law has restricted the monopoly situation in the marketplace.
Companies are entitled to follow the regulations designed by government bodies (Hazlina
Ahmad and et.al., 2010). The cited hotel group is benefited by the steps taken by the local
government for example; local bodies have initiated for hosting London Olympics thereby
provided opportunities to IHG hotels for earning good revenues in order to serve more number of

tourists. In addition to this, profitability of business is also affected by the laws designed in local
region. Government of UK provides sufficient opportunity to business for expanding its
operations and gain more profitable outcome. In this regard, IHG is suggested to conduct role
analysis of local government and must design its strategies in accordance with local laws
(Björklund, 2011).
Task 2.2: Role and influence of the EU, and its impact on business and services industries
European Union, also known as EU is a politico-economic union which is responsible for
making regulations for corporate entities which operates in European region. Laws and
regulations designed by EU influence the business of corporate entity to a major extent with an
aim of establishing EU to provide benefits for the organization however; policies now have
become more challenging (Boons and Lüdeke-Freund, 2013). The companies have lost their
flexibility in operation and have to follow the laws of EU. By the cited authority, EMU policy is
designed that has affected the service sector a lot. The hotels of IHG group are also affected by
this policy, as the hotels now have to transact in Euro rather than trading in home currency. Due
to this policy, the hotels have to monitor every change in Euro rates.
To the other hand, anti-discrimination policies designed by EU government have
provided equal opportunities for hotels to operate in a healthy environment (Aziz and Yassin,
2010). The people working in service industry are benefited in terms of having a quality work
culture. The cited union is responsible for designing and monitoring competitive polices from
which the organizations have developed harmony and peaceful environment. The policies
associated with remuneration, workplace health and safety are external factors that affect
business of service industry.
Task 2.3: Role of pressure groups and their political influence in relation to national and local
issues with regard to hospitality industry
Pressure groups are also denoted as interest or protest group. The major function of these
unions is to influence the government for making changes in rules and policies. However,
pressures groups also protest against the companies which do not follow the regulations
developed by government (Wang, Chen and Chen, 2012). The major advantage of having this
group in an economy is that the people may access the best services and the rights of consumers

who are served. On the other hand, the actions of pressure groups may affect reputation of
companies. Within the hospitality sector, pressure groups play their roles by fighting against the
business that do not proceed with the environmental law, discrimination law, fare wages law and
those which are mandatory (Teece, 2010). In case, the pressure groups find any unethical
operations of hospitality entities, then they can sue against the organizations and may pressure
consumer court and government to punish the illegal act. Within UK, there are number of
committees which are designed for keeping eye on movement of hospitality firms. As an
influence of pressure groups, the business entities must conduct legal practices otherwise; these
groups can make people aware about unlawful activities of organizations which are not good for
company's image. However, the reputation of pressure groups plays a significant role in their
success. Protect of pressure group can lead to create legal and ethical changes in business
practice and can increase the process of environmental audits (Časas and Dambrauskaitė, 2011).
Task 2.4: Legal framework within the UK, identifying the main differences between the English
and Scottish systems
Within United Kingdom, various multinational organizations have started commencing
their business practices. England, Wales, Scotland and the Northern Ireland are the major areas
where most of the business operation are located (Cantwell, Dunning and Lundan, 2010). Three
major laws are practiced in entire UK region; these are Common law, European Union and the
European Convention on the Human Rights. Here points are going to describe these laws:
Common Law- Common law consists of legal courts that are designed to take designs on
criminal and illegal acts through appointed judges. The judges of court must have special
knowledge on legal procedures (Wang and Ellinger, 2011).
European Law- Laws and regulations designed by the European Union are included in
English law. The major functions of laws are to serve the rights of community and environment
and controlling illegal activities.
European Convention of Human Rights- Government of UK has designed various
communities at local and national level, therefore, ECHR laws have been set to look over the
business practices (Lee, 2011). This is as similar to consumer court and plays a role in protecting
the rights of common people.

The Scotland legal system is a mixed and hybrid legal system that further includes the
elements of common and civil laws. Here, table shows the difference between English and
Scottish systems in respect with hotels industry:
SCOTTISH LAW ENGLISH LAW
Hotels can serve alcohol 24 *7. Both Bars and hotels can serve
alcohol 24*7.
People are restricted to smoke in
public places including bars and
restaurants (Wong, Lai and Cheng,
2011).
People are free to smoke at public
places i.e. at restaurants, hotels.
At the age of 16, individuals can
marry without any consent.
After the age of 18, anybody can
marry or take part in legal decisions.
A person after the age of 12 can make
a will.
People must be 18 to make a will.
Task 2.5: UK and EU legislative process as it affects a major UK hotel group’s business and
services at both local and national level
Being a leading hotel group of United Kingdom, IHG has to follow laws and regulations
which are incorporated within external environment. The cited hotel group follows the rules such
as licensing rules, food hygiene, fire regulations (Dieleman, 2010). Employment laws and so on.
The UK is a part Economic and Monetary Union (EMU), therefore, IHG has to deal in single
currency. Furthermore, anti discrimination policies designed by EU affects pricing policies of
business entity. The points below represents the impact of UK and EU legislative processes on
IHG Hotels:

 According to UK laws, IHG hotels have to conduct business under a specific name and
fulfill the requirements of minimum capital.
 For any new hotel, business is required to have license for business in hospitality sector
 In every hotel, there must be safety measures so-as-to to avoid injuries to anybody
 As an impact of EU laws, the IHG hotels have to maintain prices to the lowest level, so
business of others will not be hampered.
 As an additional impact, the hotel group must consider the legal age of buying alcohol
and cigarettes which is above 18 in UK. The hotel must follow the guideline and must not
sell alcohol and cigarettes (Filatotchev and Nakajima, 2010).
 Sunbeds (Regulation) Act 2010 is designed by UK government that must be follow by
IHG hotels by preventing under 18 people from making use of sunbeds on commercial
business premises
LO 3:
Task 3.1: Different types and characteristics of business that operate within the business and
services with a focus on the hospitality sector.
All the business which are designed for rendering leisure services to the customer, comes
under hospitality business. The hospitality sector is the fasted growing sector in the UK economy
and the income of this sector mostly depends on number of visitors (Needle, 2010). Here, is the
list of businesses enclosed with hospitality sector of UK:
Hotels: The hotel business is one among the famous business of hospitality industry and
considered as a major source of income. Within UK, there are more than 60-70,000 hotels,
including this the occupancy rate in hotel business is around 75%, which indicates future growth.
The average room rate for the hotels chain is 70.87 Euros 24, 0000+ people are employed in
hotel business. The UK hotel industry consists of both sector private and public (UK Labour
market, 2014).
Restaurants: Restaurant business is even popular in UK but comes after hotel business
as this business sector generates the second largest revenue for the industry. Within the UK there
are around 56,000 restaurants which employ 500,000+ full-time and the part-time workers. The
restaurant business sector is considered as the private and partnership sector, wherever most of
restaurant in UK operates in private sector (UK Labour market, 2014).

Pubs: Pubs come under hospitality business and generally made to service the leisure
needs of youth and teenagers. This place is designed for conducting parties and other social
events. Within the UK, there are around 88,098 premises which have full license including
59,000 pubs. The pub business is operated in night as its is related with entertainment section.
However, for operating a pub business there is required huge capital. In addition, most of the
private parties operate Pub business however, private partnership is famous in this hospitality
sector. Pubs usually serves alcohol therefore, it must fulfill legal formalities (Chart of the Week:
UK Income Distribution, 2013).
Contract Catering: In the contract catering business, companies provide food offering in
events and occasions. In the UK hospitality sector there are around 20,000 contract catering
outlets which have annual turnover around 5 billion pounds. In the sector of contract catering
more than 220,000 workers are employed that is around 11% of the total hospitality sector
(Chart of the Week: UK Income Distribution, 2013). Most of the contract catering company
operate under partnership or private structure.
Task 3.2: Legal processes necessary for formation and dissolution of a registered company
There is a specified legal process that is to be followed by the companies operating in UK
market:
 The company needs to pay registration fee and must provide legal documents (According
to Section 9 of 2006 companies act)
 Headquarter of company must be located in England and Wales
 An article of association is to be created in which information related to managers and
their responsibilities must explained (Björklund, 2011).
 An IN01 form must be filled for investing share capital
 Memorandum of Association is to be prepared with an information related to
shareholders consent on subscription of shares
Dissolution process is explained in the following point :
In the first step of dissolution the company has to fill state for no due and has to place
creditors on notice that all debts are cleared.
 Furthermore, it has to notify all the taxes are paid till the dates of closer
 Business Licenses should be canceled in a proper way for passing all monetary burdens.

 This is mandatory to instigate into the claims from creditors that are inspected and have
to pay the liable amount. After paying all liabilities, dissolution process can be gone in
next stage (Teece, 2010).
 The company must collect money from all owned business as well as the debtors are to
be approached for collection of owned funds.
 The business entity has to either distribute or sell business assets after setting the claims
of the business. The funds acquired from selling of business are to be used for setting off
all the liabilities.
Task 3.3: Structure and processes which determine the responsibilities and control within a
registered company
There are various stakeholders involved in business environment of registered company
including shareholders, non – executive directors, auditors etc and all are having their specific
roles in the organization (Lee, 2011). Organizational structure and related information is given in
the memorandum of companies. Here, explained the responsibilities and controls of structural
bodies:
• Board of Directors: Board of directors are responsible to monitor full and the effective
control of company therefore, they can conduct general meeting for various time frame.
The responsibility of Board of director is to carry strategic decisions.
• Company’s Secretary: The major role of company secretary is of keeping eye of
business transactions conducted by all member of Board (Needle, 2010).
• Non-Executive Directors: Non–executive directors are accountable for sharing essential
information with the board member so-as-to improve decisions making. However, they
take major decision over number of issues such as strategy, performance, resources.
• Executive Directors: The major role of executive directors is to check all the financial
expenditure made by company in a specific time frame.
• Role of Auditors: The auditors of company must have direct access to the non-executive
directors. These business entities are accountable for conducting accurate auditing for
companies financial performance (Dieleman, 2010).

CONCLUSION
The report concluded that business has to operate within an external environment which
is also consists of factors that directly influence the organization. It could be said that UK
Government has provided sufficient opportunity to business for spreading out its operations and
having more profitable business. It concluded that the operations of IHG group are affected by
anti-discrimination policy designed by EU government. In case hotels of IHG groups do not
follow UK and EU law, then their license can be canceled. In addition to that, there reputation
can be damaged that will affect goodwill, profitability and wealth of business. IHG is suggested
to conduct role analysis of local government and must design its strategies in accordance with
local laws.

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